The small business owner’s elusive goal … how to increase revenues, how to increase the value of your business. and then, how to find sources of recurring revenue and apply that in your business.
There was a time, not that long ago, where I believed that a new customer, sometimes defined as a new logo, was more valuable than an existing customer.
I continued operating under this obviously false assumption for nearly 20 years.
As a result, I had my sales team focus on net new sales.
If an existing customer ordered some services, hardware, maintenance, and so on, then that was a bonus, BUT, if we sold a net new logo, I was celebrating.
Over the years, my perspective changed as I came to realize that I had the growth formula backward. I was going about how to increase revenue in the wrong way!
The gold is in the customer base, and the new logo was a bonus. I came to realize that the customer base needs to be constantly nourished.
I came to realize that with a slight change in focus (provided we continued to maintain our revenue stream from net new logos), if we harnessed the current base effectively, it could be possible to double, maybe even triple, our revenue.
So that’s what I did.
Starting in 2012, I began a growth exercise in three key areas:
- – Selling more of our current offerings to our current customer base
- – Selling new services to our current customer base
- – Selling significantly more recurring revenue to our current and new customer base
The results were excellent, and within a seven-year period, we had grown revenues by a triple-digit percentage. (I can’t provide the actual numbers, of course.)
3 Growth Strategies on How to Increase Revenue and the Value of Your Business
I’m going to operate under the assumption that you’ve already earned your customer’s trust and that you recognize how important customer service is to your business.
Let me rephrase the above.
Your company will live or die by how well you treat your customers. No customers mean no business.
These aren’t just words on a piece of paper or some afterthought that makes it into your company’s half-baked vision statement.
If you really believe the customer service mantra, then your customers will love your business. The idea, ultimately, is to make each and every customer a raving fan.
Now, if you’ve earned their trust, and they want to buy from you, the three growth hacks make total sense. In the absence of trust, then you have bigger problems to worry about.
With the above in mind, let’s get to the three growth hacks that I used, and referenced above, and let’s discuss ways, outside of increasing pricing, to increase revenues, and ultimately, the value of your business.
1. Sell Current Products and Services to Your Existing Customers
Since you’ve already earned their trust, you don’t have to introduce your customer to the “who are we” sales pitch.
They already like you. They already buy from you.
Take a look at your current product offering.
What products do you have in your product portfolio?
Now, map your customer base with the products that each have, and make a notation of which of your products each customer has and which they don’t.
Ideally, you have this data maintained in a CRM (customer relationship management) software package, you’re tracking your sales revenue and can run a report on revenue by product category by customer.
With this information in hand, you can do a marketing campaign to your target audience, and direct the appropriate product to the respective customer. Of course, you need to deal with the concept of lead generation, and for that, you should have an inside sales team.
Although on topic, I wrote a blog post titled: 9 Steps to Build a Sales Team From The Ground Up, and this post is geared for those who are in the earlier stages on building a company, sales team, and/or, developing their sales strategy.
2. Sell New Complementary Services to Existing and New Customers
Perhaps your business is already offering a suite of products that have some potential easy and complimentary add-ons.
For example, let’s say you’re in the:
– Legal industry: You currently specialize in contract law servicing the high-tech industry. You could add trademark or patent law to your current offering, perhaps by bringing on a new lawyer with expertise in that field.
– Elevator installation and maintenance industry: You could add escalator installations and repairs as well.
– Lawn cutting business: You could add snow clearing, lawn fertilization, sprinkler systems, and so on.
These new products could potentially add significant additional revenue to your current revenue stream, and it could be an easy upsell.
Your customers already trust you for their lawn cutting service, you have an established relationship with them … Why not offer them snow clearing? We hired a gardener a few years ago, and when I decided I didn’t want to shovel my driveway any longer, the first person I spoke with was my lawn gardener.
I could have easily done a web search, and I would have, but, I went to the person I knew first.
3. Find Sources of Recurring Revenue
When the time comes to sell your business, any buyer is going to look at the size of your customer base, including many variables like the average revenue per client, the client concentration, and so on.
One very important variable that they will consider is the assurance that your next and subsequent year’s revenues will continue and potentially grow unabated. The only way to offer this assurance is through recurring revenue.
Recurring revenue, especially under long-term contract, provides a significantly better business valuation then nonrecurring revenue. For example, a recent study done by Inc. Magazine found that businesses with a recurring revenue stream received upwards of 6× revenue multiple for valuation vs 3× revenue multiple for software companies that sell perpetual licenses. They found that recurring revenue doubles the value of the business!
Next, and most importantly, having a large percentage of recurring revenue in your overall revenue mix will make it much easier to manage the ebb and flow of your business.
As a business owner, one large challenge is the uncertainty of paying next month’s expenses, including managing growth and profitability. If you know, for certain, that your business’s fixed and variable expenses are covered by the gross margin from your recurring revenue, then any additional revenue is incremental to your bottom line.
Growing a small business is really challenging, and it’s easy to find your business caught in a flat growth cycle. It’s possible that your current customers could provide an excellent source of revenue and profit growth for your company.
Don’t neglect the gold nuggets sitting inside your customer base, it’s the key on how to increase revenues, and then, the value of your business.
In the meantime, don’t neglect your website, as your site will provide a healthy source of website traffic and leads, social media marketing, and of course, email marketing to your email list and current customer base. That’s one more way of working the gold nugget (your customer base).
Good luck with your small business and wealth-creating journey.
If you enjoyed this post, you might also enjoy this one: Profit Isn’t a Disease. It’s the By-Product of a Well-Run Company. If You’re Not Yet Profitable, Fix It or Get a Job.
You should also consider subscribing to my blog. I publish one article a week on small business and wealth creation. You can subscribe here.
Also, I published a book during the summer of 2018, “The Kickass Entrepreneur’s Guide to Investing, Three Simple Steps to Create Massive Wealth with Your Business’s Profits.” It was number 1 on Amazon in both the business and non-fiction sections. You can get a free copy here.